Import duty re-introduction yields positive results: NECF

Business
BY JOHN KACHEMBERE   THE National Economic Consultative Forum (NECF) says the re-introduction of duty on some basic commodities by the Ministry of Finance will impact positively on the economy.

Finance minister Tendai Biti in August re-introduced import duties ranging between 10 to 25% on basics such as  maize meal and cooking oil and other commodities such as potato chips, baked beans and mixed fruit jam.

 

The move resulted in unjustified price increases.

 

In a recent report the NECF said despite reports of price increases, the re-introduction of duty was positively impacting on the economy.

 

“The task force’s analysis established that the cost structures of the manufacturers of the selected basic commodities did not change as a result of the re-introduction of duties.

“Whatever changes might have occurred, were results of shifts in commodity prices on the international market,” reads the NECF report in part.

 

The NECF, which was created to ensure the attainment of socio-economic goals, based on the concept of smart partnerships between the public and private sectors, said as a result of the re-introduction of duty, National Foods re-opened its Bulawayo plant while Cairns Foods’ Mutare branch resumed operations on October 1.

In addition, the companies have increased the number of operating shifts and hence creating employment.

 

But at the same time, manufacturers lack raw materials to fill the gap.

 

“Most local manufacturers of the commodities, whose duties were re-introduced, rely on the seasonal supply of key raw materials which are agro-based, which invariably leads to a high raw material inventory to guarantee the security of supply for these materials.

 

“Besides the high cost of financing operations with borrowed money, the flooding of cheap imports coming in duty-free on the market, led to locally produced key products becoming uncompetitive.”

 

Some analysts argued that after a decade of decline, the Zimbabwean economy now once again needs infant industry protection.

 

“The restoration of duty will certainly result in significant revival of the industry, as capacity utilisation is set to increase.

 

“With more companies escalating their ability, we are going to witness local companies gaining competitive edge,” said prominent economist Johannes Chiminya.

 

Chiminya however, said constant power outages and lack of raw materials and working capital might work against the full recovery of the local industry.

 

The NECF study also noted that most manufacturers whose products benefited from the re-introduction of duty, had doubled capacity utilisation from 21% to 46%, especially in Harare and Bulawayo.

 

“Despite this increase, more excess capacity still exists, for instance, National Foods still has capacity to meet the increasing national demand at affordable prices.

“It has employed 2 000 more workers. Victoria Foods has restarted three milling plants to meet demand and has employed more people.

“Olivine now has 1 200 employees. More importantly, the companies have intentions of raising prices due to the Zesa’s 31% tariff increase, which would translate into 53% extra cost.

 

Increased capacity utilisation had also led to the production of the much-needed offals by the livestock industry, saving them from importing the same from neighbouring countries such as Zambia and Malawi, the NECF added.